Rural Broadband, Green Energy and Externalities

The reason people ought to study economics more carefully is because good intentions do not always translate into "good results." In the broadband access and "green energy" businesses, though the assumption is that more broadband, and more green energy are purely positive, each could destroy some jobs, some economists note. As always is the case in real life and the real economy, choices have consequences not intended. 

The general notion about broadband spending mandated as part of the national economic “stimulus” plan is that it will create jobs. To be sure, construction of the access networks will drive some direct employment.

Some 128,000 jobs (or 32,000 jobs per year) could be generated from network construction over a four year period, and each job would cost $50,000, according to Dr. Raul Katz, adjunct professor at the Columbia Business School.

Beyond that, such new broadband facilities are supposed to spur economic development as well. But will it?

Unfortunately, says Katz, research on the productivity impact of broadband indicates the potential for capital-labor substitution and consequently, the likelihood of job destruction resulting from broadband deployment, as well as some incremental job creation. So the issue is whether net job creation exceeds net job destruction, and by how much.

You might think bringing broadband access to any community can only be a plus. As it turns, out broadband creates jobs and destroys them as well.

Since broadband tends to enable the outsourcing of jobs, a potential displacement of employment in the service sector from the area targeted for deployment might also occur, says Katz.

Also, some job creation in the targeted areas could be the result of relocation of functions from other areas of the country, and therefore, should not be considered as creating incremental employment, he adds.

Still, Katz says, the study results indicate that some job creation aside from the actual construction jobs is feasible. “Our estimates indicate that over four years the network effects could range from zero to 270,000 jobs over four years (approximately 67,500 jobs per year), although anecdotal evidence would point to the lower end of this range,” says Katz.

Separately, a new study by an economics professor Gabriel Calzada of  Juan Carlos University in Madrid says Spanish government spending on green energy to boost job creation kills 2.2 jobs for every green-collar job it creates. The damage could be even worse, the study says, if job destruction from companies fleeing Spain’s higher energy prices were included, he argues. 

What the study says is that government spending on renewable energy is less than half as efficient at job creation as private-sector spending. Specifically, each green job required on average 571,000 euros, compared with 259,000 euros in “average capital per worker” in the rest of the economy. In other words, more jobs could have been created had the money been spent in other ways. 

Some people might not consider "opportunity cost" (spending on one thing means money can't be spent on an alternative good) to be a real cost. One has to make a judgment cost about whether twice as many new jobs, were money invested another way, a better outcome. 

One can always quibble, perhaps even vehemently disagree, about economic studies. But all actions in economic life do represent choices: spending one way precludes spending another way. Businesses that can't make money die. I doubt it is possible to find many, if any, people who argue we should not extend broadband to every household and business, even if doing so will cost some jobs, as well as create some others. 

Few people, if any, will argue the United States should not achieve energy independence. But every positive step in that direction will have implications in other areas. Some forms of alternative energy consume vast quantities of water, a key issue in the western United States. Plants grown for energy raise food prices, globally. As there are no free lunches, there are no positive steps we can take that do not involve some negative consequences as well. Those consequences always should be part of the decision making process.

http://blogs.wsj.com/environmentalcapital/2009/03/30/green-jobs-ole-is-the-spanish-clean-energy-push-a-cautionary-tale/

Cord Cutting Growing, But Landlines Relatively Stable: Why?

Switched access lines provided by telcos in the United States have decreased by 17 million lines from 2005 to 2008 and telcos will lose another 10 million by 2011, says Patrick Monaghan, Yankee Group senior analyst.

You might think that is caused by users dumping their landlines in favor of mobile-only service.
But Monaghan doesn't think wireless substitution explains much of the incumbent line loss. In fact, he says, residential home phone service has only experienced a two-percent year-over-year loss from 2005 to 2008.

That's something on the order of five million subscribers. His conclusion: Most consumers are not cutting the cord. They simply are choosing cable or other providers.

There's one other important data point. Business lines in service have grown slightly over that same time period. Paradoxically, cord cutting has increased at the same time that fixed voice lines have held about level.

All of that is hard to square with estimates that 13 to 16 percent of U.S. homes already are wireless-only.  The logical inference is that higher numbers of households headed by younger people are wireless only, at the same time that business use of fixed voice is up a bit and consumer use is down a bit.

An impressionistic example: as my four children headed off to college, my own household dropped one landline and added one mobile account, but now there are four more wireless-only "households" out there.

Broadband Stimulus: Mapping Isn't the Issue for Rural Areas

Some people argue that the broadband stimulus funds should not be spent until we have better mapping to tell us where the problems are. People at the local level know where the unserved areas are.

You never will ever meet a rural telco or rural cable operator that isn't painfully aware of locations where broadband isn't available by wire.  Small communities aren't like big metro areas. People know each other, and that goes for anybody charged with providing broadband services using wires.

"Underserved" is a different matter. First you have to decide what that means, and what causes it. In some cases, lack of money, lack of PCs or lack of interest or knowledge are big issues there.

But lack of knowledge isn't the hold up in rural areas. Local people know where they need to get. Let them get there.

http://thelobbyist.net/lobby/archives/940

Consumers Want Choice: Will They Get it?

There's no question but that the central value multi-channel video services provide is "more choice."

Up to this point, industry economics have worked fairly well. Distributors have been able to build sustainable businesses delivering more choice, adding more niche channels to a basic tier.

As recurring fees continue to increase, resistance will grow, some believe. Analysts at the Diffusion Group, for example, say more consumers are unhappy than happy about having to buy a bundle of channels to get access to the relative few they actually watch.

An argument can be made that any move to full a la carte buying will reduce choice, as most smaller networks will not be able to create advertising revenue streams under such a regime.

You will know a tipping point has been reached when the first major network decides it can forego exclusive distributor carriage. That tipping point still seems relatively far off, though. It is hard to see any change from the current bundled offerings that is anywhere close to revenue neutral, even for the largest networks. Small networks will be hurt by a la carte.

http://asktdg.com/blogs/tdg-opinions/archive/2009/04/10/paytv-operators-must-embrace-expanded-consumer-choice-that-is-if-they-hope-to-avoid-becoming-dumb-pipe-providers.aspx

Broadband Stimulus "Ts and Cs" Might be Decisive

There's lots of speculation about whether large telcos will apply for American Recovery and Reinvestment projects to be sponsored by the National Telecommunications & Information Administration portion of the act. Much depends on the definitions and strings.

Though the precise meaning of "underserved," "unserved" and "broadband" are important, other apparently smaller matters, such as wholesale obligations, could be decisive. Carriers large or small are unlikely to apply if it means any new infrastructure, or an entire network, would be subject to mandatory wholesale rules, beyond those already in force.

At the moment, nobody can be sure what those terms and conditions might be.

http://www.dailytech.com/Broadband+Firms+Waiting+to+Apply+for+Stimulus+Funds/article14840.htm

Broadband Stimulus: Internal Contradictions

Not that it really will matter, but among the more-obvious internal tensions built into the "broadband stimulus" provisions of the American Recovery and Reinvestment Act is the difference between "create jobs" and "create broadband." ARRA is supposed to be about jobs, broadband is secondary.

The other obvious intellectual inconsistency is the preference for non-profit applicants for the National Telecommunications & Information Administration program, with the concomitant preference for projects that can be self-sustaining after program funds are exhausted.

The logical way to create self-sustaining capabilities is to allow for-profit entities to create a business case, and then fill a need by building new broadband infrastructure, or by creating other enabling mechanisms to encourage greater use or greater speeds and capabilities.

But that would be business logic, not political logic. There is a logic to political rationality. It just isn't the same thing as business rationality.

UC: Video as Lead App

Of late, unified communications has been as much about conferencing as anything else, despite all the effort that continues to be made to position unified communications as a "super category" that includes elements of phone systems, messaging, desktop and mobile communications.

UC integrator U4EA Technologies, for example, now has a partnership with Vidtel. By combining U4EA’s Fusion series Multi-service Business Gateways (MSBG) with Vidtel’s new video calling and conferencing services, the two companies hope to ensure video call quality and the fully utilization of WAN bandwidth.

U4EA says it is the only QoS technology specifically designed to support unified communications, including video applications.